IMF lauds Pak efforts to address economic impact of Covid shock, predicts recovery next year

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By Shri Ram Shaw

NEW DELHI, 10 July: Economies across the world have been experiencing the heat due to the global pandemic Covid-19. Given the circumstances, the International Monetary Fund (IMF) has been instrumental in lending financial help to needy and severely affected countries to address the economic impact of the Covid-19 shock. Lauding Pakistan’s efforts in combating the crisis, it has predicted a gradual recovery the next fiscal year in its report.

The report – “Policy Actions Taken by Countries” – reviews various steps Pakistan has taken since March to deal with the Covid-19 crisis. The IMF notes that the near-term economic outlook of the country has worsened notably, and growth is estimated at –0.4 per cent in FY 2020. The report then details various measures taken by both federal and provincial governments to ease the economic impact of this pandemic.

Geoffrey Okamoto, First Deputy Managing Director and Acting Chair, IMF Executive Board said, “The outbreak of Covid-19 is having a significant impact on the Pakistani economy. The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing. This has created an urgent balance of payments need. In this context of heightened uncertainty, IMF emergency financing under the Rapid Financing Instrument provides strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending, shoring up confidence, and catalyzing additional donor support.’’

“In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability,’’ he added.

Hailing Pakistan’s initiatives which are ‘‘crucial to entrench resilience, boost country’s growth potential, and deliver broad based benefits for all Pakistanis’’, Gerry Rice, Director, Communication Department, IMF said, ‘‘IMF has already provided emergency financing to Pakistan in the context of the COVID-19 crisis, and that was in the amount of about $1.4 billion, approved by our Executive Board in April, and on the Extended Fund Facility, which was already in place with Pakistan, I can tell you that technical discussions with the authorities continue.’’

‘‘They remain fluid with a view to bringing that second review of that program, that Extended Fund Facility, to a positive conclusion, as soon as possible. We’re working with the authorities, constructively, to ensure that that can be brought to a positive conclusion, as soon as possible, while taking into account the new conditions that we’re facing in Pakistan, and to ensure the program delivers on its objectives,’’ he added.

As of December 2019, Pakistan with a population of more than 220 million had a foreign debt of about Rs 8,20,000 crore, and this debt is equal to 94 per cent of the GDP. That is, if Pakistan’s GDP is equal to 100 rupees, then it has a foreign debt of 94 rupees. Pakistan will have to repay the foreign debt of about Rs 89,0000 crores in 2020. According to IMF, Pakistan’s debt can reach 9 lakh 60 thousand crore rupees by 2023.